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Economy in Brief

U.S. Leading Economic Indicators Edged Up
by Tom Moeller December 21, 2006

According to the Conference Board, the composite index of leading economic indicators edged up 0.1% last month, the same as during October which was downwardly revised. The increase in November marked the third consecutive monthly increase, the first string of three months gain since the Spring of 2005. Consensus expectations for November had been for no change.

During the last ten years there has been a 59% correlation between the y/y change in the leading indicators and the lagged change in real GDP.

The breadth of one month gain amongst the 10 components of the leading index reversed the prior month's improvement and fell to 40%, but over the last six months 55% of the component series rose.

A rising money supply, improved vendor performance and higher capital goods orders accounted for much of last month's gain in the leading index. That was offset by lower building permits, higher claims for jobless insurance and easier consumer expectations.

The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found here.

The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.

The coincident indicators increased 0.2% after an upwardly revised 0.2% increase during October. Over the last ten years there has been a 91% correlation between the y/y change in the coincident indicators and real GDP growth.

The lagging indicators rose a solid 0.5%, the largest increase since June. The ratio of coincident to lagging indicators, which is a measure of actual economic performance versus excess, was unchanged. The ratio has been stuck at the current level since since July.

Visit the Conference Board's site for coverage of leading indicator series from around the world.

Business Cycle Indicators November October Y/Y 2005 2004 2003
Leading 0.1% 0.1% 0.0% 2.3% 7.4% 5.0%
Coincident 0.2% 0.2% 2.3% 2.2% 2.5% 0.4%
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